Why didn’t I do more of this?

January 28, 2010 10:49 am by Dean Morel

I think you should be looking at buying LEAP Calls on some of them! Or bull spreads on a group of them.

Take MMM 2011 Calls. Picking one at random without calculating the best strategy:
50 – 70 call spread will cost around $5.50 with profit of $14.50, that’s almost a 1:3 risk reward for a return of SP to $10 less than the -2 line! MMM 25 Year Chart

Heck sell the $40 2011 Put and you’ll get a small credit and the entire upside for the risk of owning MMM at $39.

It seems the emotional Dean controls the transactions and he doesn’t listen to the rational Dean. I’m going to work on that.

In other news the IMF revised up global growth forecasts. I wish the market would hurry up and get really overvalued so I sell up in time to concentrate on my studies this year!

Grantham’s latest quarterly is a fantastic read. If only we could clone Grantham and install him as overlord of the world. At the end of the letter Grantham shares his notes from the following debate.

If you’re time poor then just read Grantham’s letter and his debate notes, as he totally dominated the debate. For more videos from Buttonwood click here.

It’s wonderful that a guy in the investment industry can say the following and I hope Jeremy Cooper takes note of Grantham’s comment on fees. I believe Cooper has stated the Australian Super System requires consolidation to provide lower fees. I find that belief comical.

Let’s start with the Investment Industry component. It is so obvious in this business that it’s a zero sum game. We collectively add nothing but costs. We produce no widgets; we merely shufﬂe the existing value of all stocks and all bonds in a cosmic poker game. At the end of each year, the investment community is behind the markets in total by about 1% costs and individuals by 2%.

And the costs have steadily grown. As our industry’s assets grew tenfold from 1989 to 2007, despite huge economics of scale, the fees per dollar also grew. There was no fee competition, contrary to theory.

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Quotes

"The whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts." Bertrand Russell, philosopher, mathematician, author, Nobel laureate (1872 - 1970)
"Too much prosperity makes men greedy and their desires are never controlled sufficiently to stop at the point of attainment." Seneca